Fidelity has some good news about retirement account balances
Although participants can't control how the market performs, they can establish "consistent, positive savings behaviors," says Kevin Barry, president of Workplace Investing for Fidelity Investments.
Average balances across more than 30 million retirement accounts have reached record levels despite the financial fallout of the pandemic, according to the latest quarterly analysis by Fidelity Investment.
Among the highlights:
Retirement accounts reached record levels for the second consecutive quarter. The average IRA balance was $130,000, a 1 percent increase from last quarter but a 31 percent increase from the first quarter of 2020. The average 401(k) balance increased to $123,900, a 2 percent increase from the fourth quarter of 2020 and up 36 percent from a year ago. The average 403(b) account balance increased to a record $107,300, an increase of 1 percent from last quarter and 42 percent higher than the same period in 2020.
IRA contributions increased in advance of the tax deadline. IRA activity increased in the first quarter as many investors made contributions for 2020 tax filing purposes. Investors made contributions to 1.3 million IRA accounts, a 52 percent increase over the first quarter of 2020. Total IRA contributions increased to $4.3 billion, nearly double the $2.9 billion in contributions from a year earlier. In addition, 26 percent of overall IRA contributions were made by investors under age 35, up from 23 percent from the first quarter of 2020.
401(k) loans and withdrawals dipped slightly. Despite many workers continuing to face financial challenges related to the pandemic, the percentage of workers with an outstanding 401(k) loan dropped to 17.5 percent, down from 19.7 percent a year earlier. Only 1.6 percent of 401(k) savers initiated a new loan in the first quarter, which was flat from the previous quarter and down from 2.4 percent a year ago.
The percentage of workers who made a withdrawal from their 401(k), including hardship withdrawals, dropped to 2.4 percent in the quarter, down from 6.1 percent in the fourth quarter of last year and 3 percent a year ago.
“The first quarter of last year was a difficult time for many as the effects of the pandemic started to impact the global business landscape,” said Kevin Barry, president of Workplace Investing for Fidelity Investments. “While the stock market’s recent performance provided a boost to retirement savings balances, individuals can’t control how the market performs from quarter to quarter or year to year. What they can control is establishing and sticking to consistent, positive savings behaviors. This behavior is important to putting investors on the right track to reach their long-term retirement savings goals.”
Employers also are taking steps to help workers save more for retirement. In addition to matching contributions to their employees’ accounts, employers are designing their workplace savings plans with features that can improve workers’ savings rates.
“Employers recognize how the design of their workplace savings plan can have a positive impact on retirement savings efforts,” Barry said. “Recently proposed legislation, such as SECURE Act 2.0, could provide additional support for employers as they help their employees save for retirement.
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